Document and Entity Information
Document and Entity Information | 3 Months Ended |
Mar. 31, 2016shares | |
Entity Registrant Name | BERRY PETROLEUM COMPANY, LLC |
Entity Central Index Key | 778,438 |
Current Fiscal Year End Date | --12-31 |
Document Type | 10-Q |
Document Period End Date | Mar. 31, 2016 |
Amendment Flag | false |
Entity Common Stock, Shares Outstanding | 0 |
Entity Filer Category | Non-accelerated Filer |
Document Fiscal Year Focus | 2,016 |
Document Fiscal Period Focus | Q1 |
Entity Well-known Seasoned Issuer | No |
Entity Voluntary Filers | Yes |
Entity Current Reporting Status | Yes |
Condensed Balance Sheets (unaud
Condensed Balance Sheets (unaudited) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 | |
Current assets: | |||
Cash and cash equivalents | $ 7,334 | $ 1,023 | |
Accounts receivable – trade, net | 40,755 | 46,053 | |
Derivative instruments | 295 | 13,218 | |
Other current assets | 19,582 | 20,897 | |
Total current assets | 67,966 | 81,191 | |
Noncurrent assets: | |||
Oil and natural gas properties (successful efforts method) | 5,019,579 | 5,011,061 | |
Less accumulated depletion and amortization | (2,682,011) | (1,596,165) | |
Oil and natural gas properties, successful efforts method, net | 2,337,568 | 3,414,896 | |
Other property and equipment | 113,947 | 111,495 | |
Less accumulated depreciation | (14,617) | (12,522) | |
Other property and equipment, net | 99,330 | 98,973 | |
Restricted cash | 250,612 | 250,359 | |
Other noncurrent assets | 16,836 | 16,057 | |
Noncurrent assets, excluding property, total | 267,448 | 266,416 | |
Total noncurrent assets | 2,704,346 | 3,780,285 | |
Total assets | 2,772,312 | 3,861,476 | |
Current liabilities: | |||
Accounts payable and accrued expenses | 148,681 | 125,748 | |
Derivative instruments | 1,190 | 2,241 | |
Current portion of long-term debt | [1] | 873,175 | 873,175 |
Other accrued liabilities | 29,996 | 16,735 | |
Total current liabilities | 1,053,042 | 1,017,899 | |
Noncurrent liabilities: | |||
Long-term debt, net | 844,927 | 845,368 | |
Other noncurrent liabilities | 213,003 | 212,050 | |
Total noncurrent liabilities | $ 1,057,930 | $ 1,057,418 | |
Commitments and contingencies (Note 8) | |||
Member’s equity: | |||
Additional paid-in capital | $ 2,798,713 | $ 2,798,713 | |
Accumulated deficit | (2,137,373) | (1,012,554) | |
Total member's equity | 661,340 | 1,786,159 | |
Total liabilities and member’s equity | $ 2,772,312 | $ 3,861,476 | |
[1] | Due to existing and anticipated covenant violations, the Company’s credit facility was classified as current at March 31, 2016, and December 31, 2015. |
Condensed Statements of Operati
Condensed Statements of Operations (unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Revenues and other: | ||
Oil, natural gas and natural gas liquids sales | $ 83,466 | $ 156,586 |
Electricity sales | 4,211 | 5,151 |
Gains on oil and natural gas derivatives | 508 | 3,267 |
Marketing revenues | 1,033 | 2,381 |
Other revenues | 2,048 | 1,896 |
Total revenues | 91,266 | 169,281 |
Expenses: | ||
Lease operating expenses | 50,093 | 67,189 |
Electricity generation expenses | 3,802 | 4,570 |
Transportation expenses | 12,929 | 12,606 |
Marketing expenses | 653 | 1,075 |
General and administrative expenses | 25,172 | 21,187 |
Depreciation, depletion and amortization | 58,843 | 72,979 |
Impairment of long-lived assets | 1,030,588 | 272,000 |
Taxes, other than income taxes | 14,313 | 23,332 |
Gains on sale of assets and other, net | (192) | (4,473) |
Total expenses | 1,196,201 | 470,465 |
Other income and (expenses): | ||
Interest expense, net of amounts capitalized | (19,952) | (21,421) |
Other, net | 66 | (170) |
Total other income and (expenses) | (19,886) | (21,591) |
Loss before income taxes | (1,124,821) | (322,775) |
Income tax benefit | (2) | (50) |
Net loss | $ (1,124,819) | $ (322,725) |
Condensed Statement of Member's
Condensed Statement of Member's Equity (unaudited) - 3 months ended Mar. 31, 2016 - USD ($) $ in Thousands | Total | Additional Paid-In Capital | Accumulated Deficit |
Members' Equity at Dec. 31, 2015 | $ 1,786,159 | $ 2,798,713 | $ (1,012,554) |
Net loss | (1,124,819) | 0 | (1,124,819) |
Members' Equity at Mar. 31, 2016 | $ 661,340 | $ 2,798,713 | $ (2,137,373) |
Condensed Statements of Cash Fl
Condensed Statements of Cash Flows (unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Cash flow from operating activities: | ||
Net loss | $ (1,124,819) | $ (322,725) |
Adjustments to reconcile net loss to net cash provided by operating activities: | ||
Depreciation, depletion and amortization | 58,843 | 72,979 |
Impairment of long-lived assets | 1,030,588 | 272,000 |
Amortization and write-off of deferred financing fees | 182 | 259 |
Gains on sale of assets and other, net | (310) | (1,857) |
Deferred income taxes | (2) | (50) |
Derivatives activities: | ||
Total (gains) losses | 2,861 | (2,341) |
Cash settlements | 9,011 | 27,513 |
Changes in assets and liabilities: | ||
Decrease in accounts receivable – trade, net | 5,298 | 16,392 |
Increase in other assets | (64) | (3,878) |
Increase (decrease) in accounts payable and accrued expenses | 28,000 | (5,878) |
Increase (decrease) in other liabilities | 11,053 | (9,925) |
Net cash provided by operating activities | 20,641 | 42,489 |
Cash flow from investing activities: | ||
Development of oil and natural gas properties | (11,019) | (1,609) |
Purchases of other property and equipment | (3,327) | (1,092) |
Proceeds from sale of properties and equipment and other | 16 | 3,813 |
Net cash provided by (used in) investing activities | (14,330) | 1,112 |
Cash flow from financing activities: | ||
Financing fees and other, net | 0 | 15 |
Distribution to affiliate | 0 | (43,778) |
Net cash used in financing activities | 0 | (43,763) |
Net increase (decrease) in cash and cash equivalents | 6,311 | (162) |
Cash and cash equivalents: | ||
Beginning | 1,023 | 1,586 |
Ending | $ 7,334 | $ 1,424 |
Basis of Presentation
Basis of Presentation | 3 Months Ended |
Mar. 31, 2016 | |
Basis of Presentation [Abstract] | |
Basis of Presentation | Basis of Presentation Nature of Business Berry Petroleum Company, LLC (“Berry” or the “Company”) was formed as a Delaware limited liability company on December 16, 2013, and is an indirect wholly owned subsidiary of Linn Energy, LLC (“LINN Energy”) engaged in the production and development of oil and natural gas. The Company’s predecessor, Berry Petroleum Company, was publicly traded from 1987 until December 2013. On December 16, 2013, the Company completed the transactions contemplated by the merger agreement between LINN Energy, LinnCo, LLC (“LinnCo”), an affiliate of LINN Energy, and Berry under which LinnCo acquired all of the outstanding common shares of Berry and the contribution agreement between LinnCo and LINN Energy, under which LinnCo contributed Berry to LINN Energy in exchange for LINN Energy units. Linn Acquisition Company, LLC, a direct subsidiary of LINN Energy, is currently the Company’s sole member. The Company’s properties are located in the United States (“U.S.”), in California (San Joaquin Valley and Los Angeles basins), Kansas and the Oklahoma Panhandle (Hugoton Basin), Utah (Uinta Basin), Colorado (Piceance Basin) and east Texas. Principles of Reporting The information reported herein reflects all normal recurring adjustments that are, in the opinion of management, necessary for the fair presentation of the results for the interim periods. Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted under Securities and Exchange Commission (“SEC”) rules and regulations; as such, this report should be read in conjunction with the financial statements and notes in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. The results reported in these unaudited condensed financial statements should not necessarily be taken as indicative of results that may be expected for the entire year. Investments in noncontrolled entities over which the Company exercises significant influence are accounted for under the equity method. The condensed financial statements for previous periods include certain reclassifications that were made to conform to current presentation. Such reclassifications have no impact on previously reported net income (loss), member’s equity or cash flows. Use of Estimates The preparation of the accompanying condensed financial statements in conformity with GAAP requires management of the Company to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amount of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. The estimates that are particularly significant to the financial statements include estimates of the Company’s reserves of oil, natural gas and natural gas liquids (“NGL”), future cash flows from oil and natural gas properties, depreciation, depletion and amortization, asset retirement obligations, certain revenues and operating expenses, fair values of commodity derivatives and fair values of assets acquired and liabilities assumed. As fair value is a market-based measurement, it is determined based on the assumptions that market participants would use. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. Such estimates and assumptions are adjusted when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ from these estimates. Any changes in estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods. Recently Issued Accounting Standards In February 2016, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) that is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet. This ASU will be applied retrospectively as of the date of adoption and is effective for fiscal years beginning after December 15, 2018, and interim periods within those years (early adoption permitted). The Company is currently evaluating the impact of the adoption of this ASU on its financial statements and related disclosures. In November 2015, the FASB issued an ASU that is intended to simplify the presentation of deferred taxes by requiring that all deferred taxes be classified as noncurrent, presented as a single noncurrent amount for each tax-paying component of an entity. The ASU is effective for fiscal years beginning after December 15, 2016; however, the Company early adopted it on January 1, 2016, on a retrospective basis. The adoption of this ASU did not have a material impact on the Company’s financial statements or related disclosures. In April 2015, the FASB issued an ASU that is intended to simplify the presentation of debt issuance costs by requiring that debt issuance costs related to a recognized debt liability be presented on the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The Company adopted this ASU on January 1, 2016, on a retrospective basis. The adoption of this ASU had no impact on the Company’s financial statements or related disclosures, as the Company’s only debt issuance costs relate to the Credit Facility, as defined in Note 4, which were not reclassified. In August 2014, the FASB issued an ASU that provides guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. This ASU is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter (early adoption permitted). The Company does not expect the adoption of this ASU to have a material impact on its financial statements or related disclosures. In May 2014, the FASB issued an ASU that is intended to improve and converge the financial reporting requirements for revenue from contracts with customers. This ASU will be applied either retrospectively or as a cumulative-effect adjustment as of the date of adoption and is effective for fiscal years beginning after December 15, 2017, and interim periods within those years (early adoption permitted for fiscal years beginning after December 15, 2016, including interim periods within that year). The Company is currently evaluating the impact, if any, of the adoption of this ASU on its financial statements and related disclosures. |
Chapter 11 Proceedings, Liquidi
Chapter 11 Proceedings, Liquidity and Ability to Continue as a Going Concern | 3 Months Ended |
Mar. 31, 2016 | |
Going Concern Uncertainty [Abstract] | |
Substantial Doubt about Going Concern [Text Block] | Chapter 11 Proceedings, Ability to Continue as a Going Concern and Covenant Violations Voluntary Reorganization Under Chapter 11 On May 11, 2016, the Company, LINN Energy and LinnCo (collectively, the “Debtors”), filed voluntary petitions (“Bankruptcy Petitions”) for reorganization under Chapter 11 of the U.S. Bankruptcy Code (“Bankruptcy Code”) in the U.S. Bankruptcy Court for the Southern District of Texas (“Bankruptcy Court”). The Debtors have filed a motion with the Bankruptcy Court seeking joint administration of their Chapter 11 cases. Prior to the filing of the Bankruptcy Petitions, on May 10, 2016, the Debtors entered into a restructuring support agreement (“Restructuring Support Agreement”) with certain holders (“Consenting Creditors”) collectively holding or controlling at least 66.67% by aggregate outstanding principal amounts under (i) the Company’s Second Amended and Restated Credit Agreement (“Credit Facility”) and (ii) LINN Energy’s Sixth Amended and Restated Credit Agreement (“LINN Credit Facility”). The Restructuring Support Agreement sets forth, subject to certain conditions, the commitment of the Debtors and the Consenting Creditors to support a comprehensive restructuring of the Debtors’ long-term debt (“Restructuring Transactions”). The Restructuring Transactions will be effectuated through one or more plans of reorganization (“Plan”) to be filed in cases commenced under Chapter 11 of the Bankruptcy Code. The Restructuring Support Agreement provides that the Consenting Creditors will support the use of Berry’s cash collateral under specified terms and conditions, including adequate protection terms. The Restructuring Support Agreement obligates the Debtors and the Consenting Creditors to, among other things, support and not interfere with consummation of the Restructuring Transactions and, as to the Consenting Creditors, vote their claims in favor of the Plan. The Restructuring Support Agreement may be terminated upon the occurrence of certain events, including the failure to meet specified milestones relating to the filing, confirmation and consummation of the Plan, among other requirements, and in the event of certain breaches by the parties under the Restructuring Support Agreement. The Restructuring Support Agreement is subject to termination if the effective date of the Plan has not occurred within 250 days of the bankruptcy filing. There can be no assurances that the Restructuring Transactions will be consummated. Subject to certain exceptions, under the Bankruptcy Code, the filing of the Bankruptcy Petitions automatically enjoined, or stayed, the continuation of most judicial or administrative proceedings or filing of other actions against the Debtors or their property to recover, collect or secure a claim arising prior to the date of the Bankruptcy Petitions. Accordingly, although the filing of the Bankruptcy Petitions triggered defaults on the Debtors’ debt obligations, creditors are stayed from taking any actions against the Debtors as a result of such defaults, subject to certain limited exceptions permitted by the Bankruptcy Code. Absent an order of the Bankruptcy Court, substantially all of the Debtors’ pre-petition liabilities are subject to settlement under the Bankruptcy Code. Subject to certain exceptions, under the Bankruptcy Code, the Debtors may assume, assign or reject certain executory contracts and unexpired leases subject to the approval of the Court and certain other conditions. Generally, the rejection of an executory contract or unexpired lease is treated as a pre-petition breach of such executory contract or unexpired lease and, subject to certain exceptions, relieves the Debtors of performing their future obligations under such executory contract or unexpired lease but entitles the contract counterparty or lessor to a pre-petition general unsecured claim for damages caused by such deemed breach. Counterparties to such rejected contracts or leases may assert unsecured claims in the Bankruptcy Court against the applicable Debtors’ estate for such damages. Generally, the assumption of an executory contract or unexpired lease requires the Debtors to cure existing monetary defaults under such executory contract or unexpired lease and provide adequate assurance of future performance. Accordingly, any description of an executory contract or unexpired lease with the Debtor in this quarterly report, including where applicable a quantification of the Company’s obligations under any such executory contract or unexpired lease with the Debtor is qualified by any overriding rejection rights the Company has under the Bankruptcy Code. Further, nothing herein is or shall be deemed an admission with respect to any claim amounts or calculations arising from the rejection of any executory contract or unexpired lease and the Debtors expressly preserve all of their rights with respect thereto. Ability to Continue as a Going Concern Continued low commodity prices are expected to result in significantly lower levels of cash flow from operating activities in the future and have limited the Company’s ability to access the capital markets. In addition, the Company’s Credit Facility is subject to scheduled redeterminations of its borrowing base, semi-annually in April and October, based primarily on reserve reports using lender commodity price expectations at such time. The lenders under the Credit Facility agreed to defer the April 2016 borrowing base redetermination to May 11, 2016. Continued low commodity prices, reductions in the Company’s capital budget and the resulting reserve write-downs are expected to adversely impact upcoming redeterminations and will likely have a significant negative impact on the Company’s liquidity. The Company’s filing of the Bankruptcy Petitions described above accelerated the Company’s obligations under its Credit Facility and its senior notes. The significant risks and uncertainties related to the Company’s liquidity and Chapter 11 proceedings described above raise substantial doubt about the Company’s ability to continue as a going concern. The condensed financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities and commitments in the normal course of business. The condensed financial statements do not include any adjustments that might result from the outcome of the going concern uncertainty. If the Company cannot continue as a going concern, adjustments to the carrying values and classification of its assets and liabilities and the reported amounts of income and expenses could be required and could be material. In order to decrease the Company’s level of indebtedness and maintain the Company’s liquidity at levels sufficient to meet its commitments, the Company has undertaken a number of actions, including minimizing capital expenditures and further reducing its recurring operating expenses. The Company believes that even after taking these actions, it will not have sufficient liquidity to satisfy its debt service obligations, meet other financial obligations and comply with its debt covenants. As a result, the Debtors filed Bankruptcy Petitions for reorganization under Chapter 11 of the Bankruptcy Code. Covenant Violations As of March 31, 2016, the Company was in default under certain of its debt instruments, which have subsequently been cured or a forbearance has been received. The Company’s filing of the Bankruptcy Petitions described above constitutes an event of default that accelerated the Company’s obligations under its Credit Facility and its senior notes. Additionally, other events of default, including cross-defaults, are present, including the failure to make interest payments on certain of its senior notes and the receipt of a going concern explanatory paragraph from the Company’s independent registered public accounting firm on the Company’s financial statements for the year ended December 31, 2015. Under the Bankruptcy Code, the creditors under these debt agreements are stayed from taking any action against the Company as a result of an event of default. See Note 4 for additional details about the Company’s debt. Credit Facility The Company’s Credit Facility contains the requirement to deliver audited financial statements without a going concern or like qualification or exception. Consequently, the filing of the Company’s 2015 Annual Report on Form 10-K which included such explanatory paragraph resulted in a default under the Credit Facility as of the filing date, March 28, 2016, subject to a 30 day grace period. On April 12, 2016, the Company entered into an amendment to the Credit Facility. The amendment provided for, among other things, an agreement that (i) certain events (the “Specified Events”) would not become defaults or events of default until May 11, 2016, (ii) the borrowing base would remain constant until May 11, 2016, unless reduced as a result of swap agreement terminations or collateral sales, (iii) the Company would have access to $45 million in cash that is currently restricted in order to fund ordinary course operations and (iv) the Company, the administrative agent and the lenders would negotiate in good faith the terms of a restructuring support agreement in furtherance of a restructuring of the capital structure of the Company. Pursuant to the amendment, the Specified Events are: • The receipt of a going concern qualification or explanatory statement in the auditors’ report on the Company’s financial statements for the year ended December 31, 2015; • The receipt of a going concern qualification or explanatory statement in the auditors’ report on LINN Energy’s consolidated financial statements for the year ended December 31, 2015; • The failure of the Company or LINN Energy to make certain interest payments on their unsecured notes; • The failure to maintain the ratio of Adjusted EBITDAX to Interest Expense (as each term is defined in the Credit Facility) (“Interest Coverage Ratio”); • Any cross-defaults that may arise on account of any of the foregoing, provided that no event of default is continuing under any document giving rise to such cross default; and • Any failure to provide notice of any of the events described above. As a condition to closing the amendment, the Company provided control agreements over certain deposit accounts. The filing of the Bankruptcy Petitions constitutes an event of default that accelerated the Company’s obligations under the Credit Facility. However, under the Bankruptcy Code, the creditors under this debt agreement are stayed from taking any action against the Company as a result of the default. Senior Notes The Company deferred making an interest payment totaling approximately $18 million due March 15, 2016, on the Company’s 6.375% senior notes due September 2022, which resulted in the Company being in default under these senior notes. The indenture governing the notes permits the Company a 30 day grace period to make the interest payment. On April 14, 2016, within the 30 day interest payment grace period provided for in the indenture governing the notes, the Company made an interest payment of approximately $18 million in satisfaction of its obligations. Furthermore, the Company decided to defer making an interest payment of approximately $9 million due May 1, 2016, on the Company’s 6.75% senior notes due November 2020, which, as of the payment due date, resulted in the Company being in default under these senior notes. The indenture governing the notes permits the Company a 30 day grace period to make the interest payment. The filing of the Bankruptcy Petitions constitutes an event of default that accelerated the Company’s obligations under the indentures governing the senior notes. However, under the Bankruptcy Code, holders of the senior notes are stayed from taking any action against the Company as a result of the default. |
Oil and Natural Gas Properties
Oil and Natural Gas Properties | 3 Months Ended |
Mar. 31, 2016 | |
Oil and Natural Gas Properties [Abstract] | |
Oil and Natural Gas Properties | Oil and Natural Gas Properties Oil and Natural Gas Capitalized Costs Aggregate capitalized costs related to oil, natural gas and NGL production activities with applicable accumulated depletion and amortization are presented below: March 31, 2016 December 31, 2015 (in thousands) Oil and natural gas: Proved properties $ 4,246,049 $ 4,231,836 Unproved properties 773,530 779,225 5,019,579 5,011,061 Less accumulated depletion and amortization (2,682,011 ) (1,596,165 ) $ 2,337,568 $ 3,414,896 Impairment of Proved Properties The Company evaluates the impairment of its proved oil and natural gas properties on a field-by-field basis whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The carrying values of proved properties are reduced to fair value when the expected undiscounted future cash flows of proved and risk-adjusted probable and possible reserves are less than net book value. The fair values of proved properties are measured using valuation techniques consistent with the income approach, converting future cash flows to a single discounted amount. Significant inputs used to determine the fair values of proved properties include estimates of: (i) reserves; (ii) future operating and development costs; (iii) future commodity prices; and (iv) a market-based weighted average cost of capital rate. These inputs require significant judgments and estimates by the Company’s management at the time of the valuation and are the most sensitive and subject to change. Based on the analysis described above, the Company recorded the following noncash impairment charges (before and after tax) associated with proved oil and natural gas properties: Three Months Ended March 31, 2016 2015 (in thousands) California operating area $ 984,288 $ 207,200 Uinta Basin operating area 26,677 — East Texas operating area 6,387 64,800 $ 1,017,352 $ 272,000 The impairment charges in 2016 were due to a decline in commodity prices, changes in expected capital development and a decline in the Company’s estimates of proved reserves. The impairment charges in 2015 were due to a decline in commodity prices. The carrying values of the impaired proved properties were reduced to fair value, estimated using inputs characteristic of a Level 3 fair value measurement. The impairment charges are included in “impairment of long-lived assets” on the condensed statements of operations. Impairment of Unproved Properties The Company evaluates the impairment of its unproved oil and natural gas properties whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The carrying values of unproved properties are reduced to fair value based on management’s experience in similar situations and other factors such as the lease terms of the properties and the relative proportion of such properties on which proved reserves have been found in the past. For the three months ended March 31, 2016 , the Company recorded noncash impairment charges (before and after tax) of approximately $13 million associated with unproved oil and natural gas properties in California. The Company recorded no impairment charges for unproved properties for the three months ended March 31, 2015 . The impairment charges in 2016 were due to a decline in commodity prices and changes in expected capital development. The carrying values of the impaired unproved properties were reduced to fair value, estimated using inputs characteristic of a Level 3 fair value measurement. The impairment charges are included in “impairment of long-lived assets” on the condensed statement of operations. |
Debt
Debt | 3 Months Ended |
Mar. 31, 2016 | |
Debt Disclosure [Abstract] | |
Debt | Debt The following summarizes the Company’s outstanding debt: March 31, 2016 December 31, 2015 (in thousands, except percentages) Credit facility (1) $ 873,175 $ 873,175 6.75% senior notes due November 2020 261,100 261,100 6.375% senior notes due September 2022 572,700 572,700 Net unamortized premiums 11,127 11,568 Total debt, net 1,718,102 1,718,543 Less current portion, net (2) (873,175 ) (873,175 ) Long-term debt, net $ 844,927 $ 845,368 (1) Variable interest rates of 5.25% and 3.17% at March 31, 2016 , and December 31, 2015 , respectively. (2) Due to existing and anticipated covenant violations, the Company’s credit facility was classified as current at March 31, 2016 , and December 31, 2015 . Fair Value The Company’s debt is recorded at the carrying amount in the condensed balance sheets. The carrying amount of the Company’s Credit Facility, as defined below, approximates fair value because the interest rate is variable and reflective of market rates. The Company uses a market approach to determine the fair value of its senior notes using estimates based on prices quoted from third-party financial institutions, which is a Level 2 fair value measurement. March 31, 2016 December 31, 2015 Carrying Value Fair Value Carrying Value Fair Value (in thousands) Senior notes, net $ 844,927 $ 158,548 $ 845,368 $ 200,249 Credit Facility The Company’s Second Amended and Restated Credit Agreement (“Credit Facility”) had a borrowing base of $900 million , subject to lender commitments, as of March 31, 2016 . The maturity date is April 2019. At March 31, 2016 , lender commitments under the facility were also $900 million but there was less than $1 million of available borrowing capacity, including outstanding letters of credit. In April 2016, the Company entered into an amendment to the Credit Facility to provide for, among other things, an agreement that (i) certain Specified Events would not become defaults or events of default until May 11, 2016, (ii) the borrowing base would remain constant until May 11, 2016, unless reduced as a result of swap agreement terminations or collateral sales, (iii) the Company would have access to $45 million in cash that is currently restricted in order to fund ordinary course operations and (iv) the Company, the administrative agent and the lenders would negotiate in good faith the terms of a restructuring support agreement in furtherance of a restructuring of the capital structure of the Company. Pursuant to the amendment, the Specified Events are: • The receipt of a going concern qualification or explanatory statement in the auditors’ report on the Company’s financial statements for the year ended December 31, 2015; • The receipt of a going concern qualification or explanatory statement in the auditors’ report on LINN Energy’s consolidated financial statements for the year ended December 31, 2015; • The failure of the Company or LINN Energy to make certain interest payments on their unsecured notes; • The failure to maintain the Interest Coverage Ratio; • Any cross-defaults that may arise on account of any of the foregoing, provided that no event of default is continuing under any document giving rise to such cross default; and • Any failure to provide notice of any of the events described above. As a condition to closing the amendment, the Company provided control agreements over certain deposit accounts. Redetermination of the borrowing base under the Credit Facility, based primarily on reserve reports using lender commodity price expectations at such time, occurs semi-annually, in April and October. The lenders under the Credit Facility have agreed to defer the April 2016 borrowing base redetermination to May 11, 2016. The Company’s obligations under the Credit Facility are secured by mortgages on its oil and natural gas properties and other personal property. Berry is required to maintain: 1) mortgages on properties representing at least 90% of the present value of oil and natural gas properties included on its most recent reserve report, and 2) an EBITDAX to Interest Expense ratio of at least 2.0 to 1.0 currently, 2.25 to 1.0 from March 31, 2017 through June 30, 2017 and 2.5 to 1.0 thereafter. In accordance with the amendment described above, the lenders have agreed that the failure to maintain the EBITDAX to Interest Expense ratio would not be a default or event of default until May 11, 2016. At the Company’s election, interest on borrowings under the Credit Facility is determined by reference to either the LIBOR plus an applicable margin between 1.75% and 2.75% per annum (depending on the then-current level of borrowings under the Credit Facility) or a Base Rate (as defined in the Credit Facility) plus an applicable margin between 0.75% and 1.75% per annum (depending on the then-current level of borrowings under the Credit Facility). Interest is generally payable quarterly for loans bearing interest based on the Base Rate and at the end of the applicable interest period for loans bearing interest at the LIBOR. The Company is required to pay a commitment fee to the lenders under the Credit Facility, which accrues at a rate per annum of 0.5% on the average daily unused amount of the maximum commitment amount of the lenders. The filing of the Bankruptcy Petitions constitutes an event of default that accelerated the Company’s obligations under the Credit Facility. However, under the Bankruptcy Code, the creditors under these debt agreements are stayed from taking any action against the Company as a result of the default. Senior Notes Covenants The Company’s senior notes contain covenants that, among other things, may limit its ability to: (i) incur or guarantee additional indebtedness; (ii) pay distributions or dividends on its equity or redeem its subordinated debt; (iii) create certain liens; (iv) enter into agreements that restrict distributions or other payments from the Company’s restricted subsidiaries to the Company; (v) sell assets; (vi) engage in transactions with affiliates; and (vii) consolidate, merge or transfer all or substantially all of the Company’s assets. In addition, any cash generated by the Company is currently being used by the Company to fund its activities. To the extent that the Company generates cash in excess of its needs and determines to distribute such amounts to LINN Energy, the indentures governing the Company’s senior notes limit the amount it may distribute to LINN Energy to the amount available under a “restricted payments basket,” and the Company may not distribute any such amounts unless it is permitted by the indentures to incur additional debt pursuant to the consolidated coverage ratio test set forth in the Company’s indentures. The Company’s restricted payments basket may be increased in accordance with the terms of the Company’s indentures by, among other things, 50% of the Company’s future net income, reductions in its indebtedness and restricted investments, and future capital contributions. The Company may from time to time seek to repurchase its outstanding debt through open market purchases, privately negotiated transactions or otherwise. Such repurchases, if any, may be material and will depend on prevailing market conditions, the Company’s liquidity requirements, contractual restrictions and other factors. The filing of the Bankruptcy Petitions constitutes an event of default that accelerated the Company’s obligations under the senior notes. However, under the Bankruptcy Code, holders of the senior notes are stayed from taking any action against the Company as a result of the default. Covenant Violations As of March 31, 2016 , the Company was in default under certain of its debt instruments, which have subsequently been cured or a forbearance has been received. The Company’s filing of the Bankruptcy Petitions described in Note 2 constitutes an event of default that accelerated the Company’s obligations under its Credit Facility and its senior notes. Additionally, other events of default, including cross-defaults, are present, including the failure to make interest payments on certain of its senior notes and the receipt of a going concern explanatory paragraph from the Company’s independent registered public accounting firm on the Company’s financial statements for the year ended December 31, 2015. Under the Bankruptcy Code, the creditors under these debt agreements are stayed from taking any action against the Company as a result of an event of default. |
Derivative Instruments
Derivative Instruments | 3 Months Ended |
Mar. 31, 2016 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Instruments | Derivatives Historically, the Company has hedged a portion of its forecasted production to reduce exposure to fluctuations in oil and natural gas prices. The Company also, from time to time, has entered into derivative contracts for a portion of its natural gas consumption. The current direct NGL hedging market is constrained in terms of price, volume, duration and number of counterparties, which limits the Company’s ability to effectively hedge its NGL production. The Company has also hedged its exposure to natural gas differentials in certain operating areas but does not currently hedge exposure to oil differentials. The Company has historically entered into commodity hedging transactions primarily in the form of swap contracts, collars and three-way collars. Swap contracts are designed to provide a fixed price. Collar contracts specify floor and ceiling prices to be received as compared to floating market prices. Three-way collar contracts combine a short put (the lower price), a long put (the middle price) and a short call (the higher price) to provide a higher ceiling price as compared to a regular collar and limit downside risk to the market price plus the difference between the middle price and the lower price if the market price drops below the lower price. The Company enters into these transactions with respect to a portion of its projected production or consumption to provide an economic hedge of the risk related to the future commodity prices received or paid. The Company does not enter into derivative contracts for trading purposes. The Company did not designate any of its contracts as cash flow hedges; therefore, the changes in fair value of these instruments are recorded in current earnings. See Note 6 for fair value disclosures about oil and natural gas commodity derivatives. The following table presents derivative positions for the period indicated as of March 31, 2016 : April 1 - December 31, 2016 Natural gas basis differential positions: (1) NWPL Rockies basis swaps: (2) Hedged volume (MMMBtu) 8,800 Hedged differential ($/MMBtu) $ (0.34 ) SoCal basis swaps: (3) Hedged volume (MMMBtu) 24,750 Hedged differential ($/MMBtu) $ (0.03 ) (1) Settle on the respective pricing index to hedge basis differential to the NYMEX Henry Hub natural gas price. (2) For positions which hedge exposure to differentials in producing areas, the Company receives the NYMEX Henry Hub natural gas price plus the respective spread and pays the specified index price. Cash settlements are made on a net basis. (3) For positions which hedge exposure to differentials in consuming areas, the Company pays the NYMEX Henry Hub natural gas price plus the respective spread and receives the specified index price. Cash settlements are made on a net basis. The Company did not enter into commodity derivative contracts during the three months ended March 31, 2016 . During the three months ended March 31, 2015 , the Company entered into commodity derivative contracts consisting of natural gas basis swaps for May 2015 through December 2016 to hedge exposure to differentials in certain producing areas and oil swaps for April 2015 through December 2015. In addition, the Company entered into natural gas basis swaps for May 2015 through December 2016 to hedge exposure to the differential in California, where it consumes natural gas in its heavy oil development operations. Balance Sheet Presentation The Company’s commodity derivatives are presented on a net basis in “derivative instruments” on the condensed balance sheets. The following table summarizes the fair value of derivatives outstanding on a gross basis: March 31, 2016 December 31, 2015 (in thousands) Assets: Commodity derivatives $ 2,026 $ 13,807 Liabilities: Commodity derivatives $ 2,921 $ 2,830 By using derivative instruments to economically hedge exposures to changes in commodity prices, the Company exposes itself to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes the Company, which creates credit risk. The Company’s counterparties are current participants or affiliates of participants in its Credit Facility or were participants or affiliates of participants in its Credit Facility at the time it originally entered into the derivatives. The Credit Facility is secured by the Company’s oil, natural gas and NGL reserves; therefore, the Company is not required to post any collateral. The Company does not receive collateral from its counterparties. The maximum amount of loss due to credit risk that the Company would incur if its counterparties failed completely to perform according to the terms of the contracts, based on the gross fair value of financial instruments, was approximately $2 million at March 31, 2016 . The Company minimizes the credit risk in derivative instruments by: (i) limiting its exposure to any single counterparty; (ii) entering into derivative instruments only with counterparties that meet the Company’s minimum credit quality standard, or have a guarantee from an affiliate that meets the Company’s minimum credit quality standard; and (iii) monitoring the creditworthiness of the Company’s counterparties on an ongoing basis. In accordance with the Company’s standard practice, its commodity derivatives are subject to counterparty netting under agreements governing such derivatives and therefore the risk of loss due to counterparty nonperformance is somewhat mitigated. Gains (Losses) on Derivatives A summary of gains and losses on the derivatives included on the condensed statements of operations is presented below: Three Months Ended March 31, 2016 2015 (in thousands) Gains on oil and natural gas derivatives $ 508 $ 3,267 Lease operating expenses (1) (3,369 ) (926 ) Total gains (losses) on oil and natural gas derivatives $ (2,861 ) $ 2,341 (1) Consists of gains and (losses) on derivatives entered into in March 2015 to hedge exposure to differentials in consuming areas. For the three months ended March 31, 2016 , and March 31, 2015 , the Company received net cash settlements of approximately $9 million and $28 million , respectively. |
Fair Value Measurements on a Re
Fair Value Measurements on a Recurring Basis | 3 Months Ended |
Mar. 31, 2016 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements on a Recurring Basis | Fair Value Measurements on a Recurring Basis The Company accounts for its commodity derivatives at fair value (see Note 5) on a recurring basis. The Company determines the fair value of its oil and natural gas derivatives utilizing pricing models that use a variety of techniques, including market quotes and pricing analysis. Inputs to the pricing models include publicly available prices and forward price curves generated from a compilation of data gathered from third parties. Company management validates the data provided by third parties by understanding the pricing models used, obtaining market values from other pricing sources, analyzing pricing data in certain situations and confirming that those instruments trade in active markets. Assumed credit risk adjustments, based on published credit ratings, public bond yield spreads and credit default swap spreads are applied to the Company’s commodity derivatives. Fair Value Hierarchy In accordance with applicable accounting standards, the Company has categorized its financial instruments, based on the priority of inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The following presents the fair value hierarchy for assets and liabilities measured at fair value on a recurring basis: March 31, 2016 Level 2 Netting (1) Total (in thousands) Assets: Commodity derivatives $ 2,026 $ (1,731 ) $ 295 Liabilities: Commodity derivatives $ 2,921 $ (1,731 ) $ 1,190 December 31, 2015 Level 2 Netting (1) Total (in thousands) Assets: Commodity derivatives $ 13,807 $ (589 ) $ 13,218 Liabilities: Commodity derivatives $ 2,830 $ (589 ) $ 2,241 (1) Represents counterparty netting under agreements governing such derivatives. |
Asset Retirement Obligations
Asset Retirement Obligations | 3 Months Ended |
Mar. 31, 2016 | |
Asset Retirement Obligation Disclosure [Abstract] | |
Asset Retirement Obligations | Asset Retirement Obligations The Company has the obligation to plug and abandon oil and natural gas wells and related equipment at the end of production operations. Estimated asset retirement costs are recognized as liabilities with an increase to the carrying amounts of the related long-lived assets when the obligation is incurred. The liabilities are included in “other accrued liabilities” and “other noncurrent liabilities” on the condensed balance sheets. Accretion expense is included in “depreciation, depletion and amortization” on the statements of operations. The fair value of additions to the asset retirement obligations is estimated using valuation techniques that convert future cash flows to a single discounted amount. Significant inputs to the valuation include estimates of: (i) plug and abandon costs per well based on existing regulatory requirements; (ii) remaining life per well; (iii) future inflation factors ( 2% for the three months ended March 31, 2016 ); and (iv) a credit-adjusted risk-free interest rate (average of 5.9% for the three months ended March 31, 2016 ). These inputs require significant judgments and estimates by the Company’s management at the time of the valuation and are the most sensitive and subject to change. The following table presents a reconciliation of the Company’s asset retirement obligations (in thousands): Asset retirement obligations at December 31, 2015 $ 137,563 Liabilities added from drilling 100 Current year accretion expense 1,836 Settlements (1,447 ) Revision of estimates 1,545 Asset retirement obligations at March 31, 2016 $ 139,597 |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Carry and Earning Agreement In January 2011, the Company entered into an amendment relating to certain contractual obligations to a third-party co-owner of certain Piceance Basin assets in Colorado. The amendment waives a $200,000 penalty for each well not spud by February 2011 and requires the Company to reassign to such third party, by January 31, 2020, all of the interest acquired by the Company from the third party in each 160 -acre tract in which the Company has not drilled and completed a well that is producing or capable of producing from a designated formation, or deeper formation, on January 1, 2020. The amendment also requires the Company to pay the first $9 million of costs incurred in connection with the construction of either an extension of the existing access road or a new access road, including the third party’s 50% share. Pursuant to the terms of a further amendment effective September 30, 2015, if by September 30, 2017, the Company does not expend $9 million on the construction of either the extension of the existing access road or a new access road, the Company is obligated to pay the third party 50% of the difference between $12 million and the actual amount expended on road construction as of such date. Under the terms of the 2015 amendment, this deadline is subject to further extension to no later than December 31, 2017. Due to the need to obtain regulatory approvals, among other reasons, the Company has not yet commenced construction of either an extension of the existing access road or a new access road and may be unable to do so by the extended deadline, thus triggering the payment of the obligation to the third party. Legal Matters The Company is involved in various lawsuits, claims and inquiries, most of which are routine to the nature of its business. In the opinion of management, the resolution of these matters will not have a material adverse effect on its overall business, financial position, results of operations or liquidity; however, cash flow could be significantly impacted in the reporting periods in which such matters are resolved. During the three months ended March 31, 2016 , and March 31, 2015 , the Company made no significant payments to settle any legal, environmental or tax proceedings. The Company regularly analyzes current information and accrues for probable liabilities on the disposition of certain matters as necessary. Liabilities for loss contingencies arising from claims, assessments, litigation or other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. The commencement of the Chapter 11 proceedings automatically stayed certain actions against the Company, including actions to collect pre-petition indebtedness or to exercise control over the property of the Company’s bankruptcy estates, and the Company intends to seek authority to pay all general claims in the ordinary course of business notwithstanding the commencement of the Chapter 11 proceedings in a manner consistent with the Restructuring Support Agreement. The Plan in the Chapter 11 proceedings, if confirmed, will provide for the treatment of claims against the Company’s bankruptcy estates, including pre-petition liabilities that have not otherwise been satisfied or addressed during the Chapter 11 proceedings. See Note 2 for additional information. |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company is a limited liability company treated as a disregarded entity for federal and state income tax purposes, with the exception of the state of Texas. Limited liability companies are subject to Texas margin tax. As such, with the exception of the state of Texas, the Company is not a taxable entity, it does not directly pay federal and state income taxes, and recognition has not been given to federal and state income taxes for the operations of the Company. Amounts recognized for income taxes are reported in “income tax benefit” on the condensed statements of operations. |
Supplemental Disclosures to the
Supplemental Disclosures to the Condensed Balance Sheets and Condensed Statements of Cash Flows | 3 Months Ended |
Mar. 31, 2016 | |
Supplemental disclosures to the condensed balance sheets and condensed statements of cash flows [Abstract] | |
Supplemental Disclosures to the Condensed Balance Sheets and Condensed Statements of Cash Flows | Supplemental Disclosures to the Condensed Balance Sheets and Condensed Statements of Cash Flows “Other current assets” reported on the condensed balance sheets include the following: March 31, 2016 December 31, 2015 (in thousands) California carbon allowance inventories $ 6,605 $ 7,073 Oil inventories 3,583 3,446 Deferred financing fees 7,484 8,108 Prepaid expenses and other 1,910 2,270 $ 19,582 $ 20,897 Supplemental disclosures to the condensed statements of cash flows are presented below: Three Months Ended March 31, 2016 2015 (in thousands) Cash payments for interest, net of amounts capitalized $ 6,404 $ 25,707 Cash payments for income taxes $ — $ — Noncash investing activities: Accrued capital expenditures $ 5,530 $ 40,533 For the three months ended March 31, 2015 , LINN Energy spent approximately $73 million of capital expenditures in respect of Berry’s operations. Berry recorded the $73 million to oil and natural gas properties with an offset to the advance due from LINN Energy. |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
Mar. 31, 2016 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party Transactions LINN Energy The Company has no employees. The employees of Linn Operating, Inc. (“LOI”), a subsidiary of LINN Energy, provide services and support to the Company in accordance with an agency agreement and power of attorney between the Company and LOI. For the three months ended March 31, 2016 , and March 31, 2015 , the Company incurred management fee expenses of approximately $23 million and $20 million , respectively, for services provided by LOI. The Company also had affiliated accounts payable due to LINN Energy of approximately $51 million and $9 million at March 31, 2016 , and December 31, 2015 , respectively, included in “accounts payable and accrued expenses” on the condensed balance sheets. The Company made no cash distributions to LINN Energy during the three months ended March 31, 2016 . During the three months ended March 31, 2015 , the Company made a cash distribution of approximately $44 million to LINN Energy. Other One of LINN Energy’s directors is the President and Chief Executive Officer of Superior Energy Services, Inc. (“Superior”), which provides oilfield services to the Company. The Company incurred no significant expenditures related to services rendered by Superior and its subsidiaries for the three months ended March 31, 2016 . For the three months ended March 31, 2015 , the Company incurred expenditures of approximately $100,000 related to services rendered by Superior and its subsidiaries. |
Basis of Presentation (Policies
Basis of Presentation (Policies) | 3 Months Ended |
Mar. 31, 2016 | |
Basis of Presentation [Abstract] | |
Nature of Business | Nature of Business Berry Petroleum Company, LLC (“Berry” or the “Company”) was formed as a Delaware limited liability company on December 16, 2013, and is an indirect wholly owned subsidiary of Linn Energy, LLC (“LINN Energy”) engaged in the production and development of oil and natural gas. The Company’s predecessor, Berry Petroleum Company, was publicly traded from 1987 until December 2013. On December 16, 2013, the Company completed the transactions contemplated by the merger agreement between LINN Energy, LinnCo, LLC (“LinnCo”), an affiliate of LINN Energy, and Berry under which LinnCo acquired all of the outstanding common shares of Berry and the contribution agreement between LinnCo and LINN Energy, under which LinnCo contributed Berry to LINN Energy in exchange for LINN Energy units. Linn Acquisition Company, LLC, a direct subsidiary of LINN Energy, is currently the Company’s sole member. The Company’s properties are located in the United States (“U.S.”), in California (San Joaquin Valley and Los Angeles basins), Kansas and the Oklahoma Panhandle (Hugoton Basin), Utah (Uinta Basin), Colorado (Piceance Basin) and east Texas. |
Principles of Reporting | Principles of Reporting The information reported herein reflects all normal recurring adjustments that are, in the opinion of management, necessary for the fair presentation of the results for the interim periods. Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted under Securities and Exchange Commission (“SEC”) rules and regulations; as such, this report should be read in conjunction with the financial statements and notes in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. The results reported in these unaudited condensed financial statements should not necessarily be taken as indicative of results that may be expected for the entire year. Investments in noncontrolled entities over which the Company exercises significant influence are accounted for under the equity method. The condensed financial statements for previous periods include certain reclassifications that were made to conform to current presentation. Such reclassifications have no impact on previously reported net income (loss), member’s equity or cash flows. |
Use of Estimates | Use of Estimates The preparation of the accompanying condensed financial statements in conformity with GAAP requires management of the Company to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amount of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. The estimates that are particularly significant to the financial statements include estimates of the Company’s reserves of oil, natural gas and natural gas liquids (“NGL”), future cash flows from oil and natural gas properties, depreciation, depletion and amortization, asset retirement obligations, certain revenues and operating expenses, fair values of commodity derivatives and fair values of assets acquired and liabilities assumed. As fair value is a market-based measurement, it is determined based on the assumptions that market participants would use. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. Such estimates and assumptions are adjusted when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ from these estimates. Any changes in estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods. |
Recently Issued Accounting Standards | Recently Issued Accounting Standards In February 2016, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) that is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet. This ASU will be applied retrospectively as of the date of adoption and is effective for fiscal years beginning after December 15, 2018, and interim periods within those years (early adoption permitted). The Company is currently evaluating the impact of the adoption of this ASU on its financial statements and related disclosures. In November 2015, the FASB issued an ASU that is intended to simplify the presentation of deferred taxes by requiring that all deferred taxes be classified as noncurrent, presented as a single noncurrent amount for each tax-paying component of an entity. The ASU is effective for fiscal years beginning after December 15, 2016; however, the Company early adopted it on January 1, 2016, on a retrospective basis. The adoption of this ASU did not have a material impact on the Company’s financial statements or related disclosures. In April 2015, the FASB issued an ASU that is intended to simplify the presentation of debt issuance costs by requiring that debt issuance costs related to a recognized debt liability be presented on the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The Company adopted this ASU on January 1, 2016, on a retrospective basis. The adoption of this ASU had no impact on the Company’s financial statements or related disclosures, as the Company’s only debt issuance costs relate to the Credit Facility, as defined in Note 4, which were not reclassified. In August 2014, the FASB issued an ASU that provides guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. This ASU is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter (early adoption permitted). The Company does not expect the adoption of this ASU to have a material impact on its financial statements or related disclosures. In May 2014, the FASB issued an ASU that is intended to improve and converge the financial reporting requirements for revenue from contracts with customers. This ASU will be applied either retrospectively or as a cumulative-effect adjustment as of the date of adoption and is effective for fiscal years beginning after December 15, 2017, and interim periods within those years (early adoption permitted for fiscal years beginning after December 15, 2016, including interim periods within that year). The Company is currently evaluating the impact, if any, of the adoption of this ASU on its financial statements and related disclosures. |
Oil and Natural Gas Properties
Oil and Natural Gas Properties (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Oil and Natural Gas Properties [Abstract] | |
Capitalized Costs Relating to Oil and Natural Gas Producing Activities Disclosure | Aggregate capitalized costs related to oil, natural gas and NGL production activities with applicable accumulated depletion and amortization are presented below: March 31, 2016 December 31, 2015 (in thousands) Oil and natural gas: Proved properties $ 4,246,049 $ 4,231,836 Unproved properties 773,530 779,225 5,019,579 5,011,061 Less accumulated depletion and amortization (2,682,011 ) (1,596,165 ) $ 2,337,568 $ 3,414,896 |
Details of Impairment of Long-Lived Assets Held and Used by Asset [Table Text Block] | Based on the analysis described above, the Company recorded the following noncash impairment charges (before and after tax) associated with proved oil and natural gas properties: Three Months Ended March 31, 2016 2015 (in thousands) California operating area $ 984,288 $ 207,200 Uinta Basin operating area 26,677 — East Texas operating area 6,387 64,800 $ 1,017,352 $ 272,000 |
Debt (Tables)
Debt (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Debt Disclosure [Abstract] | |
Schedule of Long-term Debt Instruments | The following summarizes the Company’s outstanding debt: March 31, 2016 December 31, 2015 (in thousands, except percentages) Credit facility (1) $ 873,175 $ 873,175 6.75% senior notes due November 2020 261,100 261,100 6.375% senior notes due September 2022 572,700 572,700 Net unamortized premiums 11,127 11,568 Total debt, net 1,718,102 1,718,543 Less current portion, net (2) (873,175 ) (873,175 ) Long-term debt, net $ 844,927 $ 845,368 (1) Variable interest rates of 5.25% and 3.17% at March 31, 2016 , and December 31, 2015 , respectively. |
Schedule of Carrying Values and Estimated Fair Values of Debt Instruments | March 31, 2016 December 31, 2015 Carrying Value Fair Value Carrying Value Fair Value (in thousands) Senior notes, net $ 844,927 $ 158,548 $ 845,368 $ 200,249 |
Derivative Instruments (Tables)
Derivative Instruments (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Summary of derivatives instruments | The following table presents derivative positions for the period indicated as of March 31, 2016 : April 1 - December 31, 2016 Natural gas basis differential positions: (1) NWPL Rockies basis swaps: (2) Hedged volume (MMMBtu) 8,800 Hedged differential ($/MMBtu) $ (0.34 ) SoCal basis swaps: (3) Hedged volume (MMMBtu) 24,750 Hedged differential ($/MMBtu) $ (0.03 ) (1) Settle on the respective pricing index to hedge basis differential to the NYMEX Henry Hub natural gas price. (2) For positions which hedge exposure to differentials in producing areas, the Company receives the NYMEX Henry Hub natural gas price plus the respective spread and pays the specified index price. Cash settlements are made on a net basis. (3) For positions which hedge exposure to differentials in consuming areas, the Company pays the NYMEX Henry Hub natural gas price plus the respective spread and receives the specified index price. Cash settlements are made on a net basis. |
Schedule of derivatives assets and liabilities | The Company’s commodity derivatives are presented on a net basis in “derivative instruments” on the condensed balance sheets. The following table summarizes the fair value of derivatives outstanding on a gross basis: March 31, 2016 December 31, 2015 (in thousands) Assets: Commodity derivatives $ 2,026 $ 13,807 Liabilities: Commodity derivatives $ 2,921 $ 2,830 |
Derivative Instruments, Gain (Loss) | A summary of gains and losses on the derivatives included on the condensed statements of operations is presented below: Three Months Ended March 31, 2016 2015 (in thousands) Gains on oil and natural gas derivatives $ 508 $ 3,267 Lease operating expenses (1) (3,369 ) (926 ) Total gains (losses) on oil and natural gas derivatives $ (2,861 ) $ 2,341 (1) Consists of gains and (losses) on derivatives entered into in March 2015 to hedge exposure to differentials in consuming areas. |
Fair Value Measurements on a 21
Fair Value Measurements on a Recurring Basis (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements on a Recurring Basis | The following presents the fair value hierarchy for assets and liabilities measured at fair value on a recurring basis: March 31, 2016 Level 2 Netting (1) Total (in thousands) Assets: Commodity derivatives $ 2,026 $ (1,731 ) $ 295 Liabilities: Commodity derivatives $ 2,921 $ (1,731 ) $ 1,190 December 31, 2015 Level 2 Netting (1) Total (in thousands) Assets: Commodity derivatives $ 13,807 $ (589 ) $ 13,218 Liabilities: Commodity derivatives $ 2,830 $ (589 ) $ 2,241 (1) Represents counterparty netting under agreements governing such derivatives. |
Asset Retirement Obligations (T
Asset Retirement Obligations (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Asset Retirement Obligation Disclosure [Abstract] | |
Asset Retirement Obligations Reconciliation | The following table presents a reconciliation of the Company’s asset retirement obligations (in thousands): Asset retirement obligations at December 31, 2015 $ 137,563 Liabilities added from drilling 100 Current year accretion expense 1,836 Settlements (1,447 ) Revision of estimates 1,545 Asset retirement obligations at March 31, 2016 $ 139,597 |
Supplemental Disclosures to t23
Supplemental Disclosures to the Condensed Balance Sheets and Condensed Statements of Cash Flows (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Supplemental disclosures to the condensed balance sheets and condensed statements of cash flows [Abstract] | |
Schedule of Accrued Liabilities | “Other current assets” reported on the condensed balance sheets include the following: March 31, 2016 December 31, 2015 (in thousands) California carbon allowance inventories $ 6,605 $ 7,073 Oil inventories 3,583 3,446 Deferred financing fees 7,484 8,108 Prepaid expenses and other 1,910 2,270 $ 19,582 $ 20,897 |
Supplemental Cash Flow Disclosures | Supplemental disclosures to the condensed statements of cash flows are presented below: Three Months Ended March 31, 2016 2015 (in thousands) Cash payments for interest, net of amounts capitalized $ 6,404 $ 25,707 Cash payments for income taxes $ — $ — Noncash investing activities: Accrued capital expenditures $ 5,530 $ 40,533 |
Chapter 11 Proceedings, Liqui24
Chapter 11 Proceedings, Liquidity and Ability to Continue as a Going Concern (Details) - USD ($) $ in Millions | 1 Months Ended | 3 Months Ended | |||
Apr. 30, 2016 | Mar. 31, 2016 | May. 10, 2016 | May. 01, 2016 | Mar. 15, 2016 | |
Debt instrument | |||||
Increase (Decrease) in Restricted Cash | $ (45) | ||||
September 2022 Senior Notes | |||||
Debt instrument | |||||
Debt Instrument, Interest Rate, Stated Percentage | 6.375% | ||||
Deferred interest payment | $ 18 | ||||
September 2022 Senior Notes | Subsequent Event [Member] | |||||
Debt instrument | |||||
Interest Paid | $ 18 | ||||
Credit Facility | Subsequent Event [Member] | |||||
Debt instrument | |||||
Holders required for agreement | 66.67% | ||||
November 2020 Senior Notes | |||||
Debt instrument | |||||
Debt Instrument, Interest Rate, Stated Percentage | 6.75% | ||||
November 2020 Senior Notes | Subsequent Event [Member] | |||||
Debt instrument | |||||
Deferred interest payment | $ 9 |
Oil and Natural Gas Propertie25
Oil and Natural Gas Properties (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2015 | |
Oil and natural gas: | |||
Proved properties | $ 4,246,049 | $ 4,231,836 | |
Unproved properties | 773,530 | 779,225 | |
Oil and natural gas properties (successful efforts method) | 5,019,579 | 5,011,061 | |
Less accumulated depletion and amortization | (2,682,011) | (1,596,165) | |
Oil and natural gas properties, successful efforts method, net | 2,337,568 | $ 3,414,896 | |
Property, Plant and Equipment [Line Items] | |||
Impairment of Unproved Oil and Gas Properties | $ 0 | ||
Impairment of Proved Oil and Gas Properties | 1,017,352 | 272,000 | |
California operating area | |||
Property, Plant and Equipment [Line Items] | |||
Impairment of Unproved Oil and Gas Properties | 13,000 | ||
Impairment of Proved Oil and Gas Properties | 984,288 | 207,200 | |
Uinta Basin operating area | |||
Property, Plant and Equipment [Line Items] | |||
Impairment of Proved Oil and Gas Properties | 26,677 | 0 | |
East Texas operating area | |||
Property, Plant and Equipment [Line Items] | |||
Impairment of Proved Oil and Gas Properties | $ 6,387 | $ 64,800 |
Debt Schedule of long term debt
Debt Schedule of long term debt (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 | |
Debt Instruments [Abstract] | |||
Senior notes, net | $ 844,927 | $ 845,368 | |
Net unamortized premiums | 11,127 | 11,568 | |
Less current portion, net (2) | [1] | (873,175) | (873,175) |
Long-term debt, net | 844,927 | 845,368 | |
Long-term debt, net | 1,718,102 | 1,718,543 | |
Credit Facility | |||
Debt Instruments [Abstract] | |||
Credit facility | [2] | 873,175 | 873,175 |
November 2020 Senior Notes | |||
Debt Instruments [Abstract] | |||
Senior notes, net | $ 261,100 | 261,100 | |
Debt Instrument, Interest Rate, Stated Percentage | 6.75% | ||
September 2022 Senior Notes | |||
Debt Instruments [Abstract] | |||
Senior notes, net | $ 572,700 | $ 572,700 | |
Debt Instrument, Interest Rate, Stated Percentage | 6.375% | ||
Line of Credit [Member] | |||
Debt Instruments [Abstract] | |||
Debt Instrument, Interest Rate at Period End | 5.25% | 3.17% | |
[1] | Due to existing and anticipated covenant violations, the Company’s credit facility was classified as current at March 31, 2016, and December 31, 2015. | ||
[2] | Variable interest rates of 5.25% and 3.17% at March 31, 2016, and December 31, 2015, respectively. |
Debt Debt fair value disclosure
Debt Debt fair value disclosure (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Carrying Value | ||
Senior notes, net | $ 844,927 | $ 845,368 |
Fair Value | ||
Senior notes, net | $ 158,548 | $ 200,249 |
Debt (Details 2)
Debt (Details 2) | 3 Months Ended |
Mar. 31, 2016USD ($) | |
Debt instrument | |
Increase (Decrease) in Restricted Cash | $ (45,000,000) |
Percent of future net income allowable to increase Berry restricted payments basket | 50.00% |
November 2020 Senior Notes | |
Debt instrument | |
Debt Instrument, Interest Rate, Stated Percentage | 6.75% |
September 2022 Senior Notes | |
Debt instrument | |
Debt Instrument, Interest Rate, Stated Percentage | 6.375% |
Line of Credit [Member] | |
Debt instrument | |
Line of Credit Facility, Maximum Borrowing Capacity | $ 900,000,000 |
Line of Credit Facility, Current Borrowing Capacity | 900,000,000 |
Line of Credit Facility, Remaining Borrowing Capacity | $ 1,000,000 |
LineOfCreditFacilityPortionOfPropertiesRequiredToMaintainMortgages | 90.00% |
Line of Credit [Member] | Minimum [Member] | |
Debt instrument | |
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage | 0.50% |
Line of Credit [Member] | Minimum [Member] | Prime Rate [Member] | |
Debt instrument | |
Debt Instrument, Basis Spread on Variable Rate | 0.75% |
Line of Credit [Member] | Minimum [Member] | London Interbank Offered Rate (LIBOR) [Member] | |
Debt instrument | |
Debt Instrument, Basis Spread on Variable Rate | 1.75% |
Line of Credit [Member] | Maximum [Member] | Prime Rate [Member] | |
Debt instrument | |
Debt Instrument, Basis Spread on Variable Rate | 1.75% |
Line of Credit [Member] | Maximum [Member] | London Interbank Offered Rate (LIBOR) [Member] | |
Debt instrument | |
Debt Instrument, Basis Spread on Variable Rate | 2.75% |
December 31, 2015 and December 31, 2016 [Member] | Line of Credit [Member] | |
Debt instrument | |
Line of Credit Facility Collateral Coverage Ratio | 2 |
March 31, 2017 and June 30, 2017 [Member] | Line of Credit [Member] | |
Debt instrument | |
Line of Credit Facility Collateral Coverage Ratio | 2.25 |
Subsequent to June 30, 2017 [Member] | Line of Credit [Member] | |
Debt instrument | |
Line of Credit Facility Collateral Coverage Ratio | 2.5 |
Derivative Instruments (Details
Derivative Instruments (Details) - 2015 - Natural gas basis differential commodity contract [Member] | Mar. 31, 2016mmbls$ / mmbls | [2] |
NWPL Rockies basis swap [Member] | ||
Derivative | ||
Hedged volume (MMMBtu) | mmbls | 8,800 | [1] |
Hedged differential ($/MMBtu) | $ / mmbls | (0.34) | [1] |
SoCal basis swap [Member] | ||
Derivative | ||
Hedged volume (MMMBtu) | mmbls | 24,750 | [3] |
Hedged differential ($/MMBtu) | $ / mmbls | (0.03) | [3] |
[1] | For positions which hedge exposure to differentials in producing areas, the Company receives the NYMEX Henry Hub natural gas price plus the respective spread and pays the specified index price. Cash settlements are made on a net basis. | |
[2] | Settle on the respective pricing index to hedge basis differential to the NYMEX Henry Hub natural gas price. | |
[3] | For positions which hedge exposure to differentials in consuming areas, the Company pays the NYMEX Henry Hub natural gas price plus the respective spread and receives the specified index price. Cash settlements are made on a net basis. |
Derivative Instruments Derivati
Derivative Instruments Derivative Instruments Balance Sheet Presentation (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Dec. 31, 2015 | |
Assets: | ||
Commodity derivatives | $ 2,026 | $ 13,807 |
Liabilities: | ||
Commodity derivatives | 2,921 | $ 2,830 |
Concentration Risk, Credit Risk, Financial Instrument, Maximum Exposure | $ 2,000 |
Derivative Instruments Deriva31
Derivative Instruments Derivative Instruments Income Statement Presentation (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | ||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Total gains (losses) on oil and natural gas derivatives | $ (2,861) | $ 2,341 | |
Cash settlements | 9,011 | 27,513 | |
Gains on oil and natural gas derivatives | |||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Total gains (losses) on oil and natural gas derivatives | 508 | 3,267 | |
Lease operating expenses | |||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Total gains (losses) on oil and natural gas derivatives | [1] | $ (3,369) | $ (926) |
[1] | Consists of gains and (losses) on derivatives entered into in March 2015 to hedge exposure to differentials in consuming areas.For the three mo |
Fair Value Measurements on a 32
Fair Value Measurements on a Recurring Basis Fair Value Measurements on a Recurring Basis (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 | |
Assets: | |||
Commodity derivatives | $ 2,026 | $ 13,807 | |
Commodity derivatives | [1] | (1,731) | (589) |
Commodity derivatives | 295 | 13,218 | |
Liabilities: | |||
Commodity derivatives | 2,921 | 2,830 | |
Commodity derivatives | [1] | (1,731) | (589) |
Commodity derivatives | $ 1,190 | $ 2,241 | |
[1] | Represents counterparty netting under agreements governing such derivatives. |
Asset Retirement Obligations (D
Asset Retirement Obligations (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2016USD ($) | |
Asset Retirement Obligation Disclosure [Abstract] | |
Fair Value Inputs, Discount Rate | 5.90% |
Asset Retirement Obligation Future Inflation Factor | 2.00% |
Change in the asset retirement obligations | |
Asset retirement obligations at December 31, 2015 | $ 137,563 |
Liabilities added from drilling | 100 |
Current year accretion expense | 1,836 |
Settlements | (1,447) |
Asset Retirement Obligation, Revision of Estimate | 1,545 |
Asset retirement obligations at March 31, 2016 | $ 139,597 |
Commitments and Contingencies (
Commitments and Contingencies (Details) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2016USD ($) | Mar. 31, 2015USD ($) | Jan. 14, 2011USD ($)a | |
Loss Contingencies [Line Items] | |||
Payments for Legal Settlements | $ 0 | $ 0 | |
Performance Guarantee [Member] | |||
Loss Contingencies [Line Items] | |||
Contractual Obligation Amount, Penalty Waived Per Well | $ 200 | ||
Contractual Obligation, Acre Of Tracts | a | 160 | ||
Contractual Obligation, Contingent Construction Expense | $ 9,000 | ||
Third Party Share of Construction Costs, Percentage | 50.00% | ||
Contractual Obligation, Penalty as Percentage of Difference Between Specified Amount and Actual Expended | 50.00% | ||
Contractual Obligation, Specified Amount for Penalty Calculation | $ 12,000 |
Supplemental Disclosures to t35
Supplemental Disclosures to the Condensed Balance Sheets (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Supplemental disclosures to the condensed balance sheets and condensed statements of cash flows [Abstract] | ||
California carbon allowance inventories | $ 6,605 | $ 7,073 |
Oil inventories | 3,583 | 3,446 |
Deferred financing fees | 7,484 | 8,108 |
Prepaid expenses and other | 1,910 | 2,270 |
Other current assets | $ 19,582 | $ 20,897 |
Supplemental Disclosures to t36
Supplemental Disclosures to the Condensed Statements of Cash Flows (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Supplemental disclosures to the statements of cash flows [Line Items] | ||
Cash payments for interest, net of amounts capitalized | $ 6,404 | $ 25,707 |
Cash payments for income taxes | 0 | 0 |
Noncash investing activities: | ||
Accrued capital expenditures | 5,530 | $ 40,533 |
Linn Energy, LLC [Member] | ||
Noncash investing activities: | ||
Capital expenditures paid by affiliate | 73,000 | |
Decrease in advance due from LINN Energy | $ 73,000 |
Related Party Transactions Rela
Related Party Transactions Related Party Transactions (Details) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2016USD ($) | Mar. 31, 2015USD ($) | Dec. 31, 2015USD ($) | |
Related Party Transaction [Line Items] | |||
Entity Number of Employees | 0 | ||
Payments of Distributions to Affiliates | $ 0 | $ 43,778 | |
Linn Energy, LLC [Member] | |||
Related Party Transaction [Line Items] | |||
Payments of Distributions to Affiliates | 0 | 44,000 | |
Superior Energy Services, Inc. [Member] | |||
Related Party Transaction [Line Items] | |||
Related Party Transaction, Amounts of Transaction | 0 | 100 | |
Linn Operating, Inc. [Member] | |||
Related Party Transaction [Line Items] | |||
Management Fee Expense | 23,000 | $ 20,000 | |
Due to Affiliate, Current | $ 51,000 | $ 9,000 |